Lessons For The Left
(Lesson 1) – Know Where You Are
The first lesson to learn is to analyse the material conditions that face you, and not simply to look at superficial appearances, and compare them with what appear to be similar conditions in the past. The material conditions, today, are not the same as those that existed in the 1920's/30's. They are also not the same as those that existed in the 1950's/60's, but the underlying economic conditions are closer to those of the latter than the former. One main difference, today, compared to the 1950's/60's, is that the ruling class has become dependent upon inflated asset prices as the main source of its wealth and power, whereas, in the 1950's/60's, it was based upon the revenues it obtained from interest/dividends on its loanable money-capital. At that time, shareholders/bondholders had an incentive to use the control they exercised over socialised capital to encourage capital accumulation and economic growth, because that increased the mass of profits, and thereby the potential for the payment of interest. Today, any such significant expansion of the economy, and of capital accumulation, means not a crisis of overproduction, as occurred in the 1920's and 70's, but a rise in interest rates, which will bring a catastrophic collapse in asset prices.
That has been seen repeatedly since 1987, and each time, instead of allowing the bubble to stay burst, as happened in 1848, central banks have responded by printing money tokens to buy up assets themselves, or to encourage commercial banks and financial institutions to do so, so that asset prices are reflated, and yields on those assets are reduced. As Marx pointed out more than 150 years ago, this does nothing to change the underlying determinants of real interest rates, which is a function of the demand and supply of money-capital, not money or money tokens. (Crudely, savings v productive investment. Printing more money tokens simply depreciates the currency, and so only changes the unit of measurement of both savings and investment equally, leaving the ratio between them unaffected.) It simply manipulates these yields on assets so that they diverge increasingly from the interest rates in the real world. In order to hold down those real interest rates, conservative governments have instead had to try to reduce the demand for money-capital, which they have done by implementing austerity measures to reduce government borrowing, as well as to slow the pace of economic growth, so reducing investment, and demand for money-capital to fund it. But, the main source of new money-capital, and, thereby, of loanable money-capital, is profits, and so slowing economic growth and capital accumulation, also slows the growth in the mass of profits, so slowing the growth in loanable money-capital, which counteracts the reduction in demand, so pushing interest rates higher.
But, also, as Marx points out in Capital III, if interest rates fall too low, some owners of loanable money-capital cannot obtain a sufficient mass of interest to live on.
“It would be still more absurd to presume that capital would yield interest on the basis of capitalist production without performing any productive function, i.e., without creating surplus-value, of which interest is just a part; that the capitalist mode of production would run its course without capitalist production. If an untowardly large section of capitalists were to convert their capital into money-capital, the result would be a frightful depreciation of money-capital and a frightful fall in the rate of interest; many would at once face the impossibility of living on their interest, and would hence be compelled to reconvert into industrial capitalists.”
(Capital III, Chapter 23)
(NB. Marx's comment, here, is also significant in examining Paul's comments about the multipolar nature of exploitation now experienced by workers, because Paul's comment shows, as I have also set out in my critique of his book “Postcapitalism”, that he has not understood the fundamental nature of Marx's analysis of capital, or of other categories such as labour-power and wages. He treats these from a subjectivist standpoint, rather than that of a materialist. He also examines things from the perspective of distribution rather than production. So, for example, Paul does not ask the question of how it is possible for, say, a landlord to exploit a worker as a tenant, rather than as a wage labourer. There has arisen a large number of buy to let landlords, because faced with lower absolute levels of interest on money-capital, owners of money-capital used it to buy property to rent. With inflated property prices others, who could not buy a home, were forced into private rentals, creating a demand for the buy to let landlords to meet.
The reality is, as Marx shows, that the cost of shelter forms a part of the determination of the value of labour-power, and wages are merely the phenomenal form of the value of labour-power. If the value of labour-power rises, because landlords increase rents, because they need to and are able to, because of rising property prices, then wages also should rise, which means that surplus value falls. In reality, tracing this through, the landlord, therefore, does not exploit the worker, as a consequence of rent, but exploits the capitalist who employs labour-power, and whose profits are, thereby, reduced as a result of higher wages! In practice, wages themselves do not rise, because conservative social-democratic governments have introduced all sorts of in-work benefits (social wage) to subsidise low-paying employers, as well as subsidising landlords via Housing Benefit. In Britain, Housing Benefit now amounts to nearly £30 billion a year. But, the capitalist state has to fund these subsidies out of tax revenues, and tax, as Marx sets out, is itself a deduction from profits, in this case the profits of the bigger, more efficient, enterprises that tend to pay higher wages. So, the profit of enterprise – the profit available for capital accumulation – is getting squeezed both by a rising amount of interest, in the form of a higher proportion going to dividends, but also from higher rents, or the subsidisation of those rents via taxes.)
Of course, today, for the very small number of money-capitalists who are billionaires, and multi-billionaires, even an insignificant yield on their assets represents tens of millions of Dollars in income, but, more significantly, they have come to depend not on these yields, some of which have actually become negative, but on the capital gains on those assets, as their prices rise ever higher, which is the reason for those yields becoming negative. For them, any rise in income due to rising interest rates, is vastly outweighed by the capital loss they incur as its corollary, given that asset prices are determined by the capitalisation of their revenues.
The economic and political consequences of this difference, compared to the 1950's/60's, are profound.
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